Achieving Vision for 2025
Positioning and Strategies of Medium-Term Business Plan 2019
In May 2017, the Furukawa Company Group announced its “Medium-Term Business Plan 2019—Building Foundations for
Renewed Growth.” The new plan is positioned as Phase 1 of the Group’s Vision for 2025, “FURUKAWA Power & Passion
150,” and the its steady implementation will represent the first step in realizing the vision.

“Marketing-based management*”“Marketing-based management” means
incorporating marketing into the core ofmanagement to provide products and services
recognized as valuable in changing markets,
as well as to identify and resolve issues andproblems faced by customers, with the aimsof deepening ties with customers, achieving
sustained growth, and increasing corporatevalue.

1. Vision for 2025
In 2015, the Group took the opportunity of its 140th anniversary to formulate its Vision for2025, entitled “FURUKAWA Power & Passion 150.” This vision clarifies the ideal image ofthe Group in fiscal 2026, when it celebrates its 150th anniversary. Seeking category leadership and uniqueness in each of our specialist fields, we will strive to achieve sustainablegrowth by addressing customers’ needs with highly distinctive technologies that are unrivaled in the industry. Under Vision for 2025, we have articulated five policies, including acommitment to “marketing-based management,” as we target consolidated annual
operating income regularly in excess of ¥15 billion.

Vision for 2025: FURUKAWA Power & Passion 150“Become a corporate group that leverages its reputation for category leadership and uniqueness to deliver growth”
Policies for achieving Vision for 2025

Increase the value of the Furukawa brand through “marketing-based management”

Continuously expand
the Machinery business

Strengthen and expand ourhuman resource foundation

Actively promote investments
to increase corporate value

Establish a robust
corporate foundation

Towards 2025 (150th anniversary of foundation)
Consolidated annual operating income regularly in excess of ¥15 billion

2. Positioning of Medium-Term Business Plan 2019
To realize Vision for 2025, we have divided the next nine-year period into three phases. The
new medium-term business plan represents Phase 1, covering the three-year period fromApril 2017 to March 2020, which is positioned as a period of “Building foundations forrenewed growth.” We regard it as a period of preparation, during which we will lay solid
foundations for expediting growth in Phase 2 and Phase 3.
In the new medium-term business plan, we clarify our business strategies, operating
cash flow allocation policy, and capital strategies, as well as our efforts to improve returnon equity (ROE). Through constructive dialogue in this way with stakeholders, including
shareholders and other investors, we will work hard to deliver sustainable growth andimproved corporate value, in addition to further enhancing corporate governance.

4Positioning of Medium-Term Business Plan 2019: “Building foundations for renewed growth”
Vision for 2025 (ideal image for 150th anniversary of foundation)
Become a corporate group that leverages
its reputation for category leadership anduniqueness to deliver growth

Increase
corporate
value

Consolidated annual operating income
regularly in excess of¥15 billion

Phase

Phase 1

Phase 2Phase 3Time period

FY2018-2020

FY2021-2023

FY2024-2026

Positioning

Build foundations
for renewed growth

Expedite growth andfurther improve profitability

Complete realization of
Vision for 2025

¥8.5 billion range

̶Regularly in excess of¥15 billion

6–7% range

̶More than 10%

OperatingPerformance incomeindicators
ROE

3. Performance Indicators and Business Policies

Operating income scenario: FY2020(Millions of yen)In the fiscal year ending March 2020, the final year of the medium-term business plan, weare targeting consolidated operating income of ¥8.5 billion range and ROE of 6–7% range.
In order to generate consolidated annual operating income regularly in excess of ¥15billion—a key performance indicator of Vision for 2025—it is crucially important that westrive to increase the value of the Furukawa brand by deeply entrenching “marketingbased management” throughout the Group. In addition, we must undertake Groupwide
mindset reforms with priority on profitability and efficiency, while developing internalstructures to facilitate such reforms.
Furthermore, we have adopted a policy of striving for sustained expansion of the­Machinery business, earmarked as a core
Operating income scenario: FY2020*business domain. To this end, we will

Machinery business

6,250

Industrial Machinery

1,250

Rock Drill Machinery

1,600

UNIC Machinery

3,400

Materials business

1,400c­ oncentrate managerial resources—human,material, and financial—on the Machinery
business and step up efforts to strengthen
and expand our human resource foundation, actively promote investments toincrease corporate value, and establish arobust corporate foundation.

Others(40)

Subtotal

8,610

Adjustments

(110)

Total

8,500

Real estate business

12%

Materials business16%* Other businesses
excluded in calculation

Machinerybusiness

72%

Metals

700

Electronics

300

Chemicals

400

Real Estate

1,000

Assumptions¥110=US$1.00, ¥115=€1.00
LME copper price: US$6,000/t

4.Segment-Specific Strategies
Machinery BusinessWe envisage that the Machinery business, our core domain, will account for 72% ofconsolidated operating income in fiscal year ending March 2020. Domestic demand willremain firm in light of various projects, including the Linear Chuo Shinkansen Line, newShinkansen lines, the Building National Resilience Plan, regional rejuvenation initiatives,
and the 2020 Summer Olympics and Paralympics in Tokyo. In addition to steadily
addressing such demand, we will build a foundation for renewed growth based on thefundamental strategies of each business segment.
Industrial MachineryWe will increase our involvement in section plant construction projects and large-scale
projects and otherwise expand our contractor businesses with the aim of transitioning
from a standalone machinery manufacturer. To achieve this, we will strengthen ourengineering capabilities and enhance our business foundation in the domestic market.

Section plantPart of the processing stage of the overallplant.
Contractor businesses
Civil engineering and construction-related
businesses that handle construction,­operational management, and the like, bycontract agreements and other contracts.
Engineering capabilities
The ability to deploy experiences, technologies,
and knowledge derived from sales activities astools to deliver optimal proposals to customers
which are considered a total balance of factors,
including function, cost, usage environment,and safety.
5Life cycle support (LCS)
Support to provide optimal management­services aimed at minimizing machinery holding
and operating costs as much as possible acrossthe total life cycle of machinery (selection anddelivery, operation and maintenance, largescale repair and regeneration, disposal andreplacement).
Stock businessBusiness targeting the after-sales market(including sales of maintenance parts, provisionof maintenance services, trade-in and salesof used products) and the rental market, as
opposed to the “flow business” (product sales),which is easily impacted by economic factors.
We will continuously expand and reinforce ourstock business, earmarked as one of “Foundations for Renewed Growth,” because it
generates relatively stable income.
Blast hole drill
A machine that drills holes for blasting­purposes and is used for relatively largescale blasting associated with mines, crushedstones, civil engineering work, and the like.
Used within the Group, it is a generic term thatcovers crawler drills, down-the-hole drills, androtary drills used on the surface.

Rock Drill Machinery
By strengthening our life cycle support (LCS) capabilities, we will increase income fromboth our flow business and stock business and reinforce the income foundation for ourdrill product lineup (blast hole drills and drill jumbos). To achieve this, we will upgrade ourdomestic service support system and establish overseas sales channels.
UNIC Machinery
Seeking to ensure stable income from domestic sales and expand income from our stockbusiness and overseas sales, we will distinguish our UNIC crane lineup by promoting
advanced functions and higher added value, in order to strengthen our competitiveness. At
the same time, we will promote our second-hand business, reestablish our overseas sales
network, and enhance our sales capabilities.
Materials BusinessIn the Metals segment, we will work to establish an optimal production and sales system with
an emphasis on profitability, in order to improve our earnings foundation. In the Electronics
segment, we will shift our focus from mature products to strategic products in an effort torestore Electronics as a strong business segment. In the Chemicals segment, we will work to
expand income from existing products and swiftly commercialize and foster newly developed
products with the aims of transforming existing businesses and securing steady income fromnew businesses.
Real Estate
We will strive to secure stable income from the Muromachi Furukawa Mitsui Building(­commercial name: COREDO Muromachi 2) and effectively utilize income from other properties
owned by the Group with the aim of reinforcing our income foundation.

5. ROE Improvement, Operating Cash Flow Allocation andCapital Strategies

ROE improvement
A key priority of the new medium-term business plan is to step up and entrench efforts
to improve ROE. Although ROE is broken down into three elements—return on sales(profitability), total asset turnover (efficiency), and financial leverage—the Group will placeparticularly high priority on enhancing profitability and efficiency.

ROE Improvement Initiatives
ROE
FY2020:
6–7% range

Strengthen andextend initiatives=Profitability
Return on sales

XEfficiency
Total asset turnoverXLeverage
Financial leverage

Profitability: Improve

Efficiency: Improve

Leverage: Reduce・ Optimally allocate Group management
resources and optimize business portfolio

・ Strength examination of investments
and prioritize each investment

・ Reduce interest-bearing debt

・ Reduce costs through productivity
improvements

・ Expand cash management service(CMS) coverage

・ Reduce external procurement costs

・ Improve efficiency of working capital(lower inventories, tighten control ofaccounts receivable)

・ Make highly functional, high-value-added,
distinctive products
・ Expand and upgrade stock businesses

・ Sell and/or effectively utilize idle assets
・ Reassess strategic shareholdings

Operating cash flow allocation and capital strategies
We will actively promote investments to increase corporate value while establishing asolid financial base. At the same time, we will allocate operating cash flows with due
consideration to shareholder returns.

6Capital investments
Over the period of the medium-term business plan, we plan to make cumulative capital
investments of around ¥16 billion, of which ¥12 billion will be allocated to our core
Machinery business, with the aim of strengthening Groupwide profitability and efficiency.

Capital Investment Plan to Strengthen Manufacturing Capabilities
Capital investment(3-year cumulative senario)

Machinery business
Materials business
OthersTotal¥12 billion¥ 2 billion¥ 2 billion¥16 billion¥ 2 billion¥ 4 billion¥ 6 billion

Industrial Machinery: Maintain, renew, etc.
Rock Drill Machinery: Expand and reform layout of Yoshii Plant, etc.
UNIC Machinery: Reinforce “mother factory” function of Sakura Plant, etc.

Dividends
Our policy is to return profits to shareholders in the form of dividends appropriated fromretained earnings. Specific dividend amounts are based on consolidated profits/losses. With
the exception of special profit/loss circumstances, we endeavor in principle to pay annual
cash dividends of ¥50.00* per share with a consolidated payout ratio of 30% or higher. In
this way, we strive for stable, continuous shareholder returns.
Treasury stock purchase and cancellation
With respect to purchase and cancellation of treasury stock, our policy is to properly consider
all relevant factors, including share price movements, capital efficiency, and cash flows.

*	Effective on October 1, 2017, theCompany will implement a 1-for-10
reverse stock split. Accordingly, on June29, 2017 the Company increased its
planned year-end dividend for the fiscal
year ending March 2018 by 10 times,
from ¥5.00 to ¥50.00 per share.

Optimal Allocation Scenario of Operating Cash Flows
Capital investment(3-year cumulative scenario)¥16 billion

Capital investment focusing on Machinery business (core business)
Dividends

Operating cash flows(3-year cumulativescenario)¥25 billion(3-year cumulative scenario)¥ 6 billion

Endeavor in principle to pay annual cash dividends of ¥50.00 per share with a consolidated
payout ratio of 30% or higher
In this way, we strive for stable, continuous shareholder returns
Interest-bearing debt reduction(3-year cumulative scenario)¥ 3 billion

Maintain/strengthen resistance to business performance declines associated with economic andmarket changes
Ensure fund procurement capability for strategic investments, such as M&As and alliances
Share buybacks/cancellation
Consider as appropriate based on stock price movements, capital efficiency, cash flows, etc.

6. Medium-Term Business Plan 2019: Milestone for Realizing Vision for 2025We have positioned the new medium-term business plan as the most important milestone forr­ealizing Vision for 2025. It is also a key transformation period, during which we will shift ourm­ anagement focus to profitability and capital efficiency. In the Machinery business, which is broader
in scope than the Materials business, we have appointed a vice president in charge of promoting themedium-term business plan in each of the three segments (Industrial Machinery, Rock Drill
Machinery, and UNIC Machinery), and we have set up an LCS Division in the Rock Drill Machinerysegment. In these and other ways, we will establish execution and responsibility frameworks toachieve the objectives of the medium-term business plan. To foster mindset and business reforms,
moreover, we have set up a “Business Process Reengineering Department,” which will spearhead
efforts to standardize and enhance administrative efficiency, increase productivity, and reconstruct
our business processes.
In our quest to achieve Vision for 2025, we will also consider M&As and alliances with peripheralbusiness companies that can complement and create continuity with our core Machinery business.
We will also look at companies that can help us create a completely different segment to serve as
the fourth pillar of the Machinery business.
Through these efforts, we will continue striving to give new life to the Group. Medium-TermBusiness Plan 2019 represents the important first step toward realizing Vision for 2025, and theGroup will harness all of its efforts to ensure the plan’s success.

7